Comisión Nacional del Mercado de Valores C/ Serrano, 47 Madrid. 15 de noviembre de Muy Sres. Nuestros:

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1 Comisión Nacional del Mercado de Valores C/ Serrano, 47 Madrid 15 de noviembre de 2011 Muy Sres. Nuestros: Con motivo de la emisión de bonos de alto rendimiento (high yield bonds) de Grifols, S.A. ( Grifols ) en Estados Unidos, y a fin de cumplir con las obligaciones previstas en el contrato de emisión de bonos y las exigencias de la Securities Exchange Commission (SEC) en relación con dicha emisión, Grifols ha presentado la siguiente información ante la SEC: Estados financieros intermedios consolidados de Grifols y sociedades dependientes correspondientes al periodo de nueve meses cerrado a 30 de septiembre de 2011 preparados bajo IFRS-IASB, que contienen: - Informe de revisión limitada bajo SAS 100 firmado por KPMG - Balance de situación - Cuenta de pérdidas y ganancias - Cuenta de pérdidas y ganancias exhaustiva - Estado de flujos de caja - Estado de cambios en el patrimonio neto - Notas a los estados financieros consolidados auditados. Documento de discusión y análisis de gestión (MD&A) En Barcelona, a 15 de noviembre de Raimon Grifols Roura Secretario del Consejo de Administración

2 Condensed Consolidated Interim Financial Statements for the nine months period ended 30 September 2011

3

4 GRIFOLS, S.A. and Subsidiaries for the nine month period ended 30 September 2011 CONTENTS Condensed Consolidated Interim Financial Statements Balance Sheet Income Statement Consolidated Comprehensive Income Statement Statement of Cash Flows Statement of Changes in Net Equity (1) General Information (2) Basis of Presentation and Accounting Principles Applied (3) Changes in the composition of the Group (4) Financial Risk Management Policy (5) Segment Reporting (6) Goodwill (7) Other Intangible Assets and Property, Plant and Equipment (8) Trade Receivables (9) Other current assets (10) Cash and Cash equivalents (11) Capital and Reserves (12) Financial Liabilities (13) Financial Income and Expenses (14) Income Tax (15) Discontinued Operation (16) Commitments and Contingencies (17) Related Parties (18) Subsequent Events I

5 Condensed Consolidated Balance Sheets at 30 September 2011 and 31 December 2010 Assets 30/09/11 31/12/10 (unaudited) (expressed in thousands of euros) Non-current assets Intangible assets Goodwill (note 6) 1,862, ,448 Other intangible assets (note 7) 905,324 78,299 Total intangible assets 2,767, ,747 Property, plant and equipment (note 7) 0 868, ,131 Investments in equity accounted investees 1, Non-current financial assets (note 12) 11,125 7,535 Deferred tax assets 0 158,382 34,889 Total non-current assets 0 3,806, ,900 Current assets Inventories 0 997, ,865 Trade and other receivables 0 Trade receivables (note 8) 374, ,355 Other receivables 52,241 44,032 Current income tax assets 55,788 14,607 Trade and other receivables 482, ,994 Other current financial assets 0 24,543 12,946 Other current assets (note 9) 13,636 80,628 Cash and cash equivalents (note 10) 0 162, ,649 Total current assets 0 1,679,898 1,144,082 Total assets 0 5,486,724 1,888,982 The accompanying notes form an integral part of the unaudited condensed consolidated interim financial statements.

6 Condensed Consolidated Balance Sheets at 30 September 2011 and 31 December 2010 Equity and liabilities 30/09/11 31/12/10 (unaudited) (expressed in thousands of euros) Equity Share capital (note 11) 0 114, ,532 Share premium (note 11) 0 890, ,802 Reserves (note 11) 0 Accumulated gains 521, ,543 Other reserves 49,741 53,061 Total reserves 571, ,604 Own shares (note 11) (1,927) (1,927) Profit for the period / year attributable to the Parent 0 43, ,513 Total 1,618, ,524 Available-for-sale financial assets (563) -- Cash flow hedges (19,199) (1,751) Translation differences (2,775) (50,733) Other comprehensive income 0 (22,537) (52,484) Equity attributable to the Parent 1,596, ,040 Non-controlling interests 0 2,372 14,350 Liabilities Total equity 0 1,598, ,390 Non-current liabilities Grants 1,563 2,088 Provisions 9,810 1,378 Non-current financial liabilities 0 Loans and borrowings, bonds and other marketable securities 2,745, ,385 Other financial liabilities 92,489 10,474 Total non-current financial liabilities (note 12) 2,838, ,859 Deferred tax liabilities 0 482,959 79,141 Total non-current liabilities 0 3,332, ,466 Current liabilities Provisions 77,722 4,365 Current financial liabilities 0 Loans and borrowings, bonds and other marketable securities 109, ,635 Other financial liabilities 12,236 18,236 Total current financial liabilities (note 12) 121, ,871 Debts with associates 1,907 1,162 Trade and other payables 0 Suppliers 230, ,678 Other payables 27,672 11,928 Current income tax liabilities 10,805 4,172 Total trade and other payables 269, ,778 Other current liabilities 0 85,160 30,950 Total current liabilities 0 555, ,126 Total liabilities 3,888,114 1,181,592 Total equity and liabilities 0 5,486,724 1,888,982 The accompanying notes form an integral part of the unaudited condensed consolidated interim financial statements.

7 Condensed Consolidated Income Statements for the Nine Month Period Ended 30 September 2011 and /09/11 30/09/10 (unaudited) (expressed in thousands of euros) Continuing Operations Revenues (note 5) 1,205, ,823 Changes in inventories of finished goods and work in progress (21,125) 34,441 Self-constructed non-current assets 77,215 23,812 Supplies (287,254) (222,484) Other operating income 5, Personnel expenses (329,001) (213,880) Other operating expenses (343,277) (150,380) Amortisation and depreciation (note 7) (59,765) (33,251) Transaction costs of Talecris business combination (note 3 & 9) (42,556) (9,713) Non-financial and other capital grants 1, Impairment and gains/(losses) on disposal of fixed assets (notes 6 & 7) (23,015) 105 Results from operating activities 183, ,087 Finance income 2,823 2,605 Finance expenses (notes 8 & 13) (123,554) (36,848) Change in fair value of financial instruments (note 13) 2,938 (6,368) Exchange gains / (losses) (3,218) 897 Finance expense (121,011) (39,714) Share of loss of equity accounted investees (942) (787) Profit before income tax 61, ,586 Income tax expense (note 14) (17,795) (32,800) Consolidated profit for the period 43,678 95,786 Profit attributable to equity holders of the Parent 43,793 97,021 Loss attributable to non-controlling interests (115) (1,235) Basic earnings per share (Euros) Diluted earnings per share (Euros) The accompanying notes form an integral part of the unaudited condensed consolidated interim financial statements.

8 Condensed Consolidated Statement of Comprehensive Income for the Nine Month Period Ended 30 September 2011 and /09/11 30/09/10 (unaudited) (expressed in thousands of euros) Consolidated profit for the period 43,678 95,786 Other comprehensive income Income and expenses generated during the period Measurement of financial instruments (563) 0 Available-for-sale financial assets (804) 0 Tax effect Cash flow hedges (19,199) 0 Cash flow hedges (31,647) 0 Tax effect 12,448 0 Translation differences 47,953 28,330 Income and expenses generated during the period 28,191 28,330 Income and expense recognised in the income statement: Cash flow hedges 1, Cash flow hedges 2, Tax effect (1,119) (99) Income and expense recognised in the income statement: 1, Other comprehensive income and expenses for the period 29,942 28,478 Total comprehensive income and expenses for the period 73, ,264 Total comprehensive income / (losses) attributable to the Parent 73, ,899 Total comprehensive income / (losses) attributable to non-controlling interests (120) 365 Total comprehensive income for the period 73, ,264 The accompanying notes form an integral part of the unaudited condensed consolidated interim financial statements.

9 Condensed Consolidated Statement of Cash Flows for the Nine Month Period Ended 30 September 2011 and 2010 Cash flows from operating activities 30/09/11 30/09/10 (expressed in thousands of euros) Profit before tax 61, ,586 Adjustments for: 174,399 68,223 Amortisation and depreciation 59,765 33,251 Other adjustments: 114,634 34,972 Losses on equity accounted investments Exchange differences 3,218 (897) Net provision charges 17, (Profit) / loss on disposal of fixed assets 7,585 (239) Government grants taken to income (1,081) (668) Finance expense / income 108,524 36,096 Other adjustments (22,335) (932) Changes in capital and assets (66,584) (84,508) Change in inventories 8,059 (14,496) Change in trade and other receivables (37,019) (25,587) Change in current financial assets and other current assets 2,228 (37,321) Change in current trade and other payables (39,852) (7,104) Other cash flows from operating activities (108,330) (40,454) Interest paid (104,497) (21,671) Interest recovered 1,970 2,158 Income tax paid (5,803) (20,941) Net cash from operating activities 60,958 71,847 Cash flows from investing activities Payments for investments (1,730,941) (82,427) Group companies and business units (note 3) (1,624,869) (3,728) Property, plant and equipment and intangible assets (105,259) (75,046) Property, plant and equipment (87,026) (67,915) Intangible assets (18,233) (7,131) Other financial assets (813) (3,653) Proceeds from the sale of property, plant and equipment 76,385 2,551 Property, plant and equipment 70,913 2,551 Other financial assets 5,472 0 Net cash used in investing activities (1,654,556) (79,876) Cash flows from financing activities (unaudited) Proceeds from and payments for equity instruments (2,473) (1,250) Issue (2,473) 0 Acquisition of own shares 0 (1,250) Proceeds from and payments for financial liability instruments 1,802,630 27,619 Issue 2,987,566 75,680 Redemption and repayment (1,184,936) (48,061) Dividends and interest on other equity instruments paid 0 (27,282) Other cash flows from financing activities (290,923) 323 Transaction costs of financial instruments issued in the acquisition of Talecris (291,270) 0 Other amounts received from financing activities Net cash from / (used in) financing activities 1,509,234 (590) Effect of exchange rate fluctuations on cash 7,330 13,742 Net increase in cash and cash equivalents (77,034) 5,123 Cash and cash equivalents at beginning of the period 239, ,372 Cash and cash equivalents at end of period 162, ,495 The accompanying notes form an integral part of the unaudited condensed consolidated interim financial statements.

10 Condensed Statement of Changes in Consolidated Equity for the Nine Month Period Ended 30 September 2011 Attributable to equity holders of the Parent Other comprehensive income Available-for Equity Profit attributable sale attributable Share Share to Interim Own Translation Cash flow financial to Non-controlling capital premium Reserves (*) Parent dividend Shares differences hedges assets Parent interests Equity (unaudited) (expressed in thousands of euros) Balances at 31 December , , , ,972 (31,960) (677) (90,253) (1,948) 0 566,371 12, ,528 Translation differences , ,730 1,600 28,330 Cash flow hedges Other comprehensive income for the period , ,878 1,600 28,478 Profit/(loss) for the period , ,021 (1,235) 95,786 Total comprehensive income for the period , , , ,264 Operations with own shares (1,250) (1,250) -- (1,250) Other changes (71) (71) (166) (237) Distribution of 2009 profit Reserves ,783 (88,783) Dividends (27,229) (27,229) (53) (27,282) Interim dividend (31,960) 31, Operations with equity holders or owners ,712 (147,972) 31,960 (1,250) (28,550) (219) (28,769) Balances at 30 September , , ,615 97,021 0 (1,927) (63,523) (1,800) 0 661,720 12, ,023 Balances at 31 December , , , ,513 0 (1,927) (50,733) (1,751) 0 693,040 14, ,390 Translation differences , ,958 (5) 47,953 Cash flow hedges (17,448) -- (17,448) -- (17,448) Available-for-sale financial assets Gains/(losses) (563) (563) -- (563) Other comprehensive income for the period ,958 (17,448) (563) 29,947 (5) 29,942 Profit/(loss) for the period , ,793 (115) 43,678 Total comprehensive income for the period , ,958 (17,448) (563) 73,740 (120) 73,620 Other changes -- (36) (36) (213) (249) Capital Increase (note 11) 8, ,553 (2,473) , ,462 Other movements (note 11) , , ,864 Australian-Swiss group acquisition (note 3) , ,168 (11,645) (9,477) Distribution of 2010 profit Reserves ,513 (115,513) Operations with equity holders or owners 8, , ,036 (115,513) ,458 (11,858) 817,600 Balances at 30 September , , ,640 43,793 0 (1,927) (2,775) (19,199) (563) 1,596,238 2,372 1,598,610 (*) Reserves include accumulated earnings and other reserves The accompanying notes form an integral part of the unaudited condensed consolidated interim financial statements.

11 (1) General Information Grifols, S.A (hereinafter, the Company or the Parent Company) was founded in Spain on 22 June 1987 as a limited liability company for an indefinite period of time. Its registered and fiscal address is in Barcelona (Spain). The Company s statutory activity is the provision of corporate administrative, management and control services and investment in real and personal property. Its main activity consists on the provision of corporate administrative, management and control services to its subsidiaries. All the Company s shares are listed in the Barcelona, Madrid, Valencia, and Bilbao stock exchanges and on the Spanish electronic market. Class B shares issued in May 2011, began quotation on the NASDAQ (United States) and on the Automated Quotation System in Spain on 2 June 2011 (see note 11). Grifols, S.A. is the parent company of a Group (hereinafter the Group) which acts on an integrated basis under a common management and whose main activity is the procurement, manufacture, preparation, and sale of therapeutic products, particularly haemoderivatives. The main manufacturing facilities of the Spanish companies of the Group are located in Barcelona, Parets del Vallés (Barcelona) and Torres de Cotillas (Murcia), while those of the North American companies are located in Los Angeles (California, USA), Clayton (North Carolina, USA) and Melville (New York, USA). (2) Basis of Presentation and Accounting Principles Applied These condensed consolidated interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting. They do not include all of the information required for full annual financial statements, and should be read in conjunction with the consolidated financial statements of the Group for the year ended 31 December 2010 prepared in accordance with IFRS as issued by the International Accounting Standard Board (IASB). The Board of Directors of Grifols, S.A. authorised for issue these Condensed Consolidated Interim Financial Statements at their meeting held on 20 October The figures in these condensed consolidated interim financial statements are expressed in thousands of Euros. The condensed consolidated interim financial statements of the Grifols Group for the nine month period ended 30 September 2011 have been prepared based on the accounting records kept by Grifols and its subsidiaries. 1

12 Accounting principles and basis of consolidation applied The accounting principles and basis of consolidation applied in the preparation of these condensed consolidated interim financial statements are the same as those applied by the Group in its consolidated financial statements as at and for the year ended 31 December In addition, the following standards that entered into force in 2011 have, accordingly, been taken into account for the preparation of these condensed consolidated interim financial statements: - IAS 24 Revised Related Party Disclosures (effective date: 1 January 2011). - Amendment to IFRIC 14: Prepayment of a minimum funding requirement (effective date: 1 January 2011). - IFRS 7 Amendments resulting from May 2010 Annual Improvements (effective date: 1 January 2011). - Amendment to IFRIC 13 Customer Loyalty Programmes (effective date: 1 January 2011). - IAS 34 Amendments resulting from May 2010 Annual Improvements (effective date: 1 January 2011). - IAS 1 Amendments resulting from May 2010 Annual Improvements (effective date: 1 January 2011). The application of these standards has not had a significant impact on the Group s condensed consolidated interim financial statements or has not been applicable. The IASB also issued the following standards that are effective for reporting periods beginning after 1 January 2011: - Amendment to IAS 12 Deferred tax: recovery of underlying assets (effective date: 1 January 2012) - Amendment to IFRS 1 Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters (effective date: 1 July 2011) - Amendment to IFRS 7 Financial Instrument: Disclosures Transfer of Financial Assets (effective date: 1 July 2011) - IFRS 9 Financial instruments (effective date: 1 January 2013) - IFRS 10 Consolidated Financial Statements (effective date: 1 January 2013) - IFRS 11 Joint Arrangements (effective date: 1 January 2013) 2

13 - IFRS 12 Disclosures of Interests in Other Entities (effective date: 1 January 2013) - IFRS 13 Fair Value Measurement (effective date: 1 January 2013) - IAS 27 Separate Financial Statements (effective date: 1 January 2013) - IAS 28 Investments in Associates and Joint Ventures (effective date: 1 January 2013) - IAS 19 Employee Benefits (effective date: 1 January 2013) The Group has not applied any of the standards or interpretations issued prior to their effective date. The Company s directors do not expect that any of the above amendments will have a significant effect on the consolidated financial statements. Responsibility regarding information, estimates, hypotheses, and relevant judgments in the application of accounting policies The information contained in these condensed consolidated interim financial statements is the responsibility of the Directors of the Parent Company. The preparation of condensed consolidated interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates. These estimates are made based on the best information available and refer to: - The income tax expense which, according to IAS 34, is recognised in interim periods based on the best estimate of the average tax rate that the Group expects for the annual period. - The useful lives of property, plant, and equipment and intangible assets. -Measurement of assets and goodwill to determine any related impairment losses. - Evaluation of the capitalisation of development costs. - Evaluation of provisions and contingencies. - The assumptions used for calculation of the fair value of financial instruments. - Evaluation of the effectiveness of hedging. - Evaluation of the nature of leases (operating or financial). - Assumptions used for determining the fair value of assets, liabilities and contingent liabilities in Talecris business combination. 3

14 The estimates, hypotheses and relevant judgements used in the preparation of these condensed consolidated interim financial statements do not differ from those applied in the preparation of the consolidated financial statements as at and for the year ended 31 December Seasonality of transactions during this period Given the nature of the activities conducted by the Group, there are no factors that determine any significant seasonality in the Group s operations that could affect the interpretation of these condensed consolidated interim financial statements for the nine months period ended 30 September 2011 in comparison with the financial statements for a full fiscal year. Relative importance When determining the information to be disclosed in these Notes, in accordance with IAS 34, the relative importance in relation to these condensed consolidated interim financial statements has been taken into account. (3) Changes in the composition of the Group For the preparation of its condensed consolidated interim financial statements, the Group has included its investments in all subsidiaries, associates and joint ventures. Note 1 (b) of the consolidated financial statements as at 31 December 2010 lists the subsidiaries, associates and joint ventures in which Grifols, S.A. holds a direct or indirect stake and that were included in the scope of consolidation at that date. The main variations in the scope of consolidation during the interim period ended 30 September 2011 are detailed below: Talecris Biotherapeutics Holdings Corp. and subsidiaries On 2 June 2011 the Group acquired 100% of the share capital of the American company Talecris Biotherapeutics Holdings Corp. (hereinafter Talecris), which also specialises in the production of plasma-derived biological medication, for a total of Euros 2,593 million (US Dollars 3,736 million). The operation was performed through a combined offer of cash and a new issue of Grifols non voting shares (hereinafter Class B shares) (see note 11). The offer was made in relation to all Talecris shares and the price offered per share amounted to US Dollars 19 in cash (totaling US Dollar 2,541 million) and Grifols s Class B shares for each Talecris share issued held by Talecris LLC and directors of Talecris and Grifols s Class B shares for each Talecris share issued (totaling US Dollar 1,195 million). 4

15 On 2 May 2011, the Group signed a Consent Agreement with the Staff of the Bureau of Competition of the US Federal Trade Commission (FTC) by means of which the conditions for the merger transaction between both companies were agreed. To satisfy the Consent Agreement conditions, the Group has signed agreements for the sale of assets and entered into certain commercial, lease and manufacturing agreements with the Italian company Kedrion, for up to seven years. These agreements refer to the following areas: - Kedrion and Grifols entered into a contract manufacturing agreement to fractionate and purify Kedrion s plasma to deliver IVIG and Albumin under Kedrion s private label, and Factor VIII under the trade name Koate, all of them for sale only in the United States. - Grifols is committed to sell to Kedrion the Melville fractionation facility. Grifols lease from Kedrion the Melville fractionation facility being the lease term 3 years with an optional extension of up to 1 year at Grifols request. - Grifols transfer to Kedrion all Koate (factor VIII) technology and commercial agreements for the US market. Grifols will produce Koate for Kedrion up to a period of 7 years. - Grifols is committed to sell to Kedrion two plasma collection centers. In addition Grifols committed to sell liters of source plasma to Kedrion at a fixed price. At 30 September 2011, the Group has sold to Kedrion those plasma collection centers. - Grifols authorizes Kedrion to market and sell in the US, IVIG and albumin manufactured by Grifols for Kedrion. As required by the Consent Agreement Grifols satisfied all necessary conditions within ten days of the completion of the acquisition. At the date of publication of these Condensed Consolidated Interim Financial Statements, not all the information necessary is available to definitively determine the fair values of intangible assets, liabilities and contingent liabilities and to allocate the purchase price accordingly. The values shown in the tables below should therefore be considered as provisional amounts. 5

16 Details of the aggregate business combination cost and provisional fair value of the net assets acquired and provisional goodwill at the acquisition date (or excess of the cost of the business combination over the fair value of identifiable net assets acquired) are as follows: Thousands of Euros Thousands of USD New issue of shares (valuation of Class B Shares) 829,799 1,195,574 Cash paid (19 USD per share) 1,763,601 2,540,997 Total cost of business combination 2,593,400 3,736,571 Fair value of net assets acquired (provisional) 1,011,105 1,456,799 Goodwill (excess of the cost of the business combination over the fair value of identifiable net assets acquired) 1,582,295 2,279,772 (see note 6) Cash paid 1,763,601 2,540,996 Cash and cash equivalents of the acquired company (149,693) (215,678) Cash outflow for the acquisition 1,613,908 2,325,318 The fair value of Class B shares has been determined at the average price of the first weeks of quotation price on the stock exchange, being considered as a representative period for determining the fair value as they started quotation on 2 June. Costs incurred in the acquisition amounting to Euros 59.6 million have been expensed as incurred and are included in Other operating expenses for an amount of Euros 42.6 million in the nine month period ended 30 September 2011, Euros 9.7 million in the nine month period ended 30 September 2010, and Euros 7.3 million in the last three months of the year Goodwill generated in the acquisition is attributed to the workforce, synergies and other expected benefits from the business combination of the assets and activities of the Group. The acquisition of Talecris will consolidate the Group as the world s third largest producer of plasma products, significantly expanding its presence in the United States. Among other aspects, it will increase product availability in the market to the benefit of patients, through higher collection capacity and plasma fractionation. 6

17 Had the acquisition taken place at 1 January 2011, the Group s revenue for the period would be Euros 507,039 thousand higher and consolidated profit for the period, excluding exceptional items as transaction costs and stock options cancellation costs derived from the change of control, would be Euros 72,391 thousand higher. Revenues and profits corresponding to Talecris from the date of acquisition to 30 September 2011 amount to Euros 420,799 thousand and Euros 74,511 thousand. At the date of acquisition, the amounts of recognized assets, liabilities and contingent liabilities are as follows: Thousands of Euros Fair Value Thousands of USD Thousands of Euros Book Value Thousands of USD Intangible assets (note 7) 778,934 1,122,288 21,122 30,432 Property, plant and equipment 466, , , ,462 (note 7) Non - current financial assets 1,466 2,112 1,466 2,112 Deferred tax assets 51,022 73,513 51,022 73,513 Non-current assets held for sale 8,200 11,814 2,254 3,247 Inventories 452, , , ,398 Trade and other receivables 191, , , ,992 Other assets 2,364 3,406 2,364 3,406 Cash and cash equivalents 149, , , ,678 Total assets 2,102,218 3,028,876 1,216,852 1,753,240 Non - current provisions 9,250 13,327 9,250 13,327 Non - current financial liabilities 6,289 9,061 6,289 9,061 Current financial liabilities 473, , , ,621 Current provisions 67,966 97,926 31,180 44,924 Trade and other payables 146, , , ,875 Other current liabilities 48,533 69,927 43,510 62,689 Deferred tax liabilities 339, ,340 21,610 31,135 Total liabilities and contingent liabilities 1,091,113 1,572, ,283 1,053,632 Total net assets acquired 1,011,105 1,456, , ,608 The following fair values have been determined on a provisional basis: Intangible assets (currently marketed products, research and development) have been determined provisionally pending completion of an independent valuation. Contingent liabilities have also been determined provisionally pending a final independent legal advice which is expected during the measurement period. 7

18 Australian-Swiss group In August 2011 the Group acquired the remaining 51% outstanding capital stock of Woolloomooloo Holdings Pty Ltd, the holding company of the Australian-Swiss group, Lateral-Medion, of which the Company had acquired 49% of the capital stock and 100% of the voting rights on March 2009, thus having control since then. The total sum paid for the acquisition of the remaining 51% of the capital stocks amounts to AUD 12.5 million (Euros 9.5 million). Therefore, the difference between price paid and noncontrolling interest has been accounted for directly as additional reserves by an amount of Euros 2.2 million. (4) Financial Risk Management Policy At 30 September 2011 the Group s financial risk management objectives and policies are consistent with those disclosed in the consolidated financial statements for the year ended 31 December (5) Segment Reporting The distribution by business segments of the Group s net revenues and consolidated income for the six month periods ended 30 September 2011 and 30 September 2010 is as follows: Net revenues (Thousands of Euros) Nine months ended Nine months ended SEGMENTS 30 September September 2010 Bioscience 1,017, ,756 Hospital 70,743 65,285 Diagnostic 87,480 81,001 Raw materials + Other 30,036 13,781 TOTAL 1,205, ,823 The variation in Bioscience and Raw materials+other net revenues reflects mainly the incorporation of four months of Talecris companies amounting to Euros 403,038 thousand and Euros 17,761 thousand respectively. 8

19 SEGMENTS Consolidated Income/(loss) (Thousands of Euros) Nine months ended 30 September 2011 Nine months ended 30 September 2010 Bioscience 347, ,159 Hospital 5,559 5,070 Diagnostic (10,442) 5,844 Raw materials + Other 15,190 6,880 Total income of reported segments 358, ,953 Unallocated expenses plus net financial result (296,728) (125,367) Profit before income tax from continuing operations 61, ,586 The variation in the Diagnostic profit is mainly due to the goodwill impairment recognized in this period (see note 6). The variation in the Bioscience and Raw materials+other segment profit reflects mainly the incorporation of four months of Talecris companies amounting to Euros 118,169 thousand and Euros 8,108 thousand respectively. The main variation in unallocated expenses plus net financial result is mainly due to the transaction costs from the acquisition of Talecris Biotherapeutics Holdings Corp. 9

20 (6) Goodwill Details and movement in goodwill during the nine months ended 30 September 2011 are as follows: Net value Thousands of Euros Balance at Business Translation Balance at 31/12/10 Combination Impairment differences 30/09/11 Grifols UK,Ltd. (UK) 7, (55) 7,927 Grifols Italia,S.p.A. (Italy) 6, ,118 Biomat USA, Inc. (USA) 113, (1,181) 111,871 Plasmacare, Inc. (USA) 38, (402) 38,062 Woolloomooloo Holdings Pty Ltd. (Australia) 23,832 0 (13,000) (655) 10,177 Talecris Biotherapeutics (USA) 0 1,582, ,049 1,688, ,448 1,582,295 (13,000) 103,756 1,862,499 (note 3) Goodwill has been allocated to each of the Group s cash-generating units (CGUs) in accordance with their respective business segments and on a geographical basis, this being the lowest level at which goodwill is controlled for management purpose and lower than the operating segments. Plasmacare, Inc. is integrated into the management of Biomat USA, Inc. for the purpose of impairment testing. Goodwill has been allocated to the cash generating units as follows: - UK: bioscience segment - Italy: bioscience segment - USA: bioscience segment - Australia: mainly to diagnostic segment. The recoverable amount of a CGU is determined based on its value in use. These calculations use cash flow projections based on the financial budgets approved by management. Cash flows estimated as of the year in which stable growth has been reached are extrapolated using the estimated growth rates indicated below. At 30 September 2011, on the basis of the profits generated during the nine-month period ended 30 September 2011, there are no indications that the goodwill of the CGUs belonging to the Bioscience segment has been impaired. 10

21 For the six months ended 30 June 2011, there was an impairment indicator for the Australia CGU and therefore goodwill impairment was prepared. The CGU s market performance was lower than expected. As a result of the impairment test performed, an impairment of the CGU s goodwill (diagnostic) of Euros 13,000 thousand has been accounted for at 30 June At 30 September 2011, there are no indications that an additional impairment has to be recorded. The key assumptions used in calculating values in use for the year ended 31 December 2010 and for the six month period ended 30 June 2011 were as follows: Growth rate 31/12/2010 Pre- tax discount rate Bioscience 2.0% - 3.0% 10.5% % Diagnostic 2.0% 10.4% Growth rate 30/06/2011 Pre - tax discount rate Bioscience N/A N/A Diagnostic 2.0% 11.5% Management determined budgeted gross margins based on past experience and forecasted market development. Average weighted growth rates are coherent with the forecasts included in industry reports. The discount rate used reflects specific risks related to the CGU. 11

22 (7) Other Intangible Assets and Property, Plant, and Equipment Movement of Other Intangible Assets and Property, Plant and Equipment during the nine months ended 30 September 2011 is as follows: Thousands of Euros Other intangible Property, plant Total Assets and equipment Total Cost at 31/12/ , , ,156 Total dep. & amort. At 31/12/2010 (73,562) (221,515) (295,077) Impairment at 31/12/ (649) (649) Balance at 31/12/ , , ,430 Cost Additions 18,232 91, ,250 Business Combination 778, ,674 1,245,608 Disposals (619) (127,779) (128,398) Transfers (117) (895) (1,012) Translation differences 53,942 33,285 87,227 Total Cost at 30/09/2011 1,002,233 1,118,598 2,120,831 Depreciation & amortization Additions (21,733) (38,032) (59,765) Disposals 4 15,450 15,454 Transfers ,012 Translation differences (2,092) (3,849) (5,941) Total dep. & amort. At 30/09/2011 (96,787) (247,530) (344,317) Impairment Additions (122) (1,974) (2,096) Disposals Translation differences 0 (131) (131) Impairment at 30/09/2011 (122) (2,737) (2,859) Balance at 30/09/ , ,331 1,773,655 Additions in property, plant and equipment mainly relates to the Bioscience segment, Talecris contributing an amount of Euros 51.4 million. 12

23 At 30 September 2011 there are no indications that these assets have been impaired. Intangible assets with indefinite useful lives amount to Euros 24,015 thousand at 30 September 2011 (Euros 24,691 thousand at 31 December 2010). The key assumptions used in calculating value in use for intangible assets with indefinite useful lives for the year 2010 were as follows: Growth rate used to extrapolate projections: 3.0% Pre-tax discount rate: 10.9% (a) Business Combination The main identified intangible assets correspond to the currently marketed products in that they represent the combined value of the product rights, regulatory approval documentation, product brand names, and doctor and patient relationship related to each product (note 3). The estimated remaining useful life remains at 30 years, using the straight-line method. To determine the fair value of tangible assets and their remaining useful life of the tangible assets, the Company has used a third party appraisal (note 3). The main increase in value corresponds to buildings and machinery which their remaining useful life is an average of 23 years and 8 years, respectively. (b) Sale of Spanish properties and lease back On 10 May, 2011 the Group sold five properties based in Spain mainly related to non-core assets such as offices and warehouses and a factory premise, by an aggregated amount of Euros 80.4 million to Gridpan Invest, S.L., a company fully owned by Scranton Enterprises, B.V., a related party of Grifols, S.A. Two of the premises were sold together with its related mortgage loans amounting in total to Euros 53.5 million. As a result of the transactions the Group has recognized a net loss of Euros 7.4 million. The prices paid for the properties were established based on the appraisals made by independent appraisers. At the same time, operating lease agreements for the aforementioned properties were entered into with Gridpan Invest, S.L., the main terms of the agreements being as follows: - Compulsory initial term of five years, - Initial rent established at market prices and will be reviewed annually, based on the percentage variation in the Spanish Consumer Price Index (CPI), - Automatic extensions of five-year periods that can be avoided by both parties by a six month anticipated notice. - Upon vacating the premises, the lessor will reimburse Grifols for the remaining value of leasehold improvements Grifols made. 13

24 In addition, the Group entered into a free of charge purchase option over the shares of Gridpan Invest, S.L. exercisable between 10 May 2016 and 10 May The strike price will be at market value at the date of exercise, based on independent appraisers. The rental expense recognized by the Group for the nine months period ended 30 September 2011 in connection with these agreements amounted to Euros 2,996 thousand, which related in full to the minimum contractual payments. (c) Sale of properties and equipment in the USA and lease back On 9 June 2011 the Group entered into several agreements for the sale and lease back of a manufacturing building and related equipment to third party companies California Biogrif 330, LP and LA 300 Biologicals Financing, LP respectively. In addition, a lease was entered into for the piece of land on which the building sold is constructed, for a term of 99 years, to the same party. The sales price received for the building amounted to US Dollars 35.4 million (Euros 24.6 million) and the sales price for the equipment US Dollars 23.8 million (Euros 16.5 million). The lease of the building has been designed as operating, while the lease of the equipment is considered as finance considering the terms of the purchase option. As a result of the sale of the building, the Group has recognized a net loss of US Dollars 2.4 million (Euros 1.3 million) mainly due to the expenses incurred on the transaction. The main terms of the operating lease agreement over the building are as follows: - Compulsory initial term of 20 years. - Initial rent has been established at market prices and will be reviewed annually with a 3% increase. On the first day of the sixth year, the remaining rents until year twenty will be paid in advance in a lump sum. - Renewal option to extend for a ten-year period at Grifols Group election. - Purchase options granted during the sixth year and in year twenty (20) at market value, to be estimated by independent appraisers. The main terms of the finance lease agreement over the equipment are a compulsory term of five years, and sixty (60) monthly rent instalments of Dollars 529 thousand (Euros 369 thousand). The lease agreement is not renewable and provides for the repurchase of the equipment at the end of the term for $1. The rental expense recognized by the Group for the nine month period ended 30 September 2011 in connection with the operating lease agreement amounted to US Dollars 2,456 thousand (Euros 1,713 thousand), which related in full to the minimum contractual payments. 14

25 Future minimum non cancellable payments of new operating leases derived from the above mentioned operating leases and Talecris business acquisition are as follows: Thousand Euros 30/09/11 Maturity: Up to 1 year 21,608 Between 1 and 5 years 88,675 More than 5 years 16,405 Total future minimum payments 126,688 Details of minimum payments and the current finance lease liabilities incurred on the financial lease transaction over the equipment in the US described above, by maturity date, are as follows: Current Thousand Euros 30/09/11 Non-current Minimum payments 4,700 17,338 Interest (1,856) (3,371) Present value 2,844 13,967 Maturity at: Thousand Euros 30/09/11 Minimum payments Interest Present value Less than one year 4,700 1,856 2,844 Two years 4,700 1,497 3,203 Three years 4,700 1,092 3,608 Four years 4, ,063 Five years 3, ,093 Total 22,038 5,227 16,811 15

26 (8) Trade Receivables At 30 September 2011, some Group companies had signed purchase agreements for credit rights without recourse with certain financial institutions. The total sum of credit rights sold without recourse, for which ownership was transferred to financial entities pursuant to the aforementioned agreements, amounts to Euros 134,560 thousand for the nine month period ended at 30 September 2011 (Euros 96,870 thousand for the nine month period ended 30 September 2010). The financial expenses of these operations incurred by the Group for the nine month period ended 30 September 2011 amounted to approximately Euros 5,439 thousand (Euros 4,210 thousand for the nine month period ended at 30 September 2010) which are recorded under the Finance Expenses caption in the condensed consolidated income statement. (9) Other current assets Other current assets corresponding to the costs incurred in connection with the issuance of new share capital increase have been taken to equity when the capital increase has been performed while other current assets corresponding to the issuance of senior debt and High Yield bonds, have been deducted from the financial liability when the debt has been issued (2 June 2011) (see note 12). Expenses amounting to Euros 42,556 thousand,, incurred related to the business combination have been expensed (Euros 9,713 thousand for the nine month period ended at 30 September 2010). (10) Cash and Cash equivalents The Group has carried out the following investing and/or financing operations which have not required the use of cash or cash equivalents: The Group has sold properties in Spain amounting to Euros 80.4 million which together with its related mortgage loan of Euros 53.5 million resulted in a net cash inflow of Euros 26.9 million (see note 7). Part of the consideration paid in the acquisition of Talecris Group has been realized by delivery of Class B shares (see note 3). The issue of Class B shares has had no cash impact. 16

27 At 30 September 2011 net cash from operating activities amounts to Euros thousand. The impact of non-recurring effects are the following: This amount includes a decrease in profit before tax due to the transaction costs incurred by the Group during the nine month period ended 30 September 2011 amounting to Euros 42,556 thousand (9,713 thousand for the nine months ended at 30 September 2010) that have been paid in this period. Change in current trade and other payables includes Euros 19,516 thousand corresponding to business combination costs accrued by Talecris companies prior to acquisition date and paid during June (11) Capital and Reserves Details of consolidated equity and changes are shown in the condensed consolidated statement of changes in equity, which forms part of the condensed consolidated interim financial statements. (a) Share Capital and Share Premium As authorised by the shareholders at their extraordinary shareholders general meeting held on 25 January 2011, the Parent Company agreed to increase share capital through the issue of 83,811,688 new non-voting shares (Class B shares), which have been used in its acquisition of Talecris. These shares are listed on the NASDAQ Global Market (United States) and the Automated Quotation System ( mercado continuo ) (Spain). At 30 September 2011 the Company s share capital currently stands at 114,913,618 Euros, represented by: Class A Shares: 213,064,899 ordinary shares of 0.50 Euros nominal value each, fully subscribed and paid up, of the same class and series being the ordinary shares of the Company. Class B Shares: 83,811,688 preference non-voting shares of 0.10 Euros nominal value each, of the same class and series, and with the preferential rights set forth in the Company s by laws. 17

28 On 1 June 2011 Grifols, S.A. informed that the Nota sobre Acciones (Securities Note) requested for the admission to trading of Class B Shares was registered. Grifols has requested the admission to trading of the Class B Shares on the Stocks Exchanges of Madrid, Barcelona, Bilbao and Valencia as well as on Automated Quotation System ( mercado continuo ) and, through the American Depositary Shares (ADSs), on the National Association of Securities Dealers Automated Quotation (NASDAQ). The trading of Class B Shares on the Stock Market Interconnection System and the ADSs on the NASDAQ started on 2 June The fair value of the Class B Shares has been estimated as its market value on the first weeks of quotation, as they began quotation on 2 June The positive difference amounting to Euros 52,864 thousand arising between the value assigned in the deeds of the share increase (Euros 776,935 thousand) and the fair value (Euros 829,799 thousand) has been presented as reserves. The main characteristics of the Class B shares are as follows: - Each Class B share entitles its holder to receive a minimum annual preferred dividend out of the distributable profits at the end of each fiscal year equal to a 0.01 Euros per Class B share if the aggregate preferred dividend does not exceed the distributable profits of that fiscal year. This preferred dividend is not cumulative if no sufficient distributable profits are obtained in the year. - Each Class B share is entitled to receive, in addition to the preferred dividend referred to above, the same dividends and other distributions as one Grifols ordinary share. - Each Class B share entitles its holder to have it redeemed under certain circumstances, if a tender offer for all or part of the shares in the Company is made and settled except if holders of Class B shares have been entitled to participate in such offer and have their shares acquired in such offer equally and on the same terms as holders of Class A shares. Terms and conditions of redemption incorporated in by laws limit the amounts to be redeemed to the existence of distributable reserves and limit the percentage of shares to be redeemed to a relation to the ordinary shares to which the offer is addressed. - Each Class B shares has the right to receive prior to the ordinary shares, upon the winding-up and liquidation of Grifols, an amount equal to the sum of (i) the nominal value of each Class B share, and (ii) the share premium paid-up for such Class B share when it was subscribed for. Each holder is entitled to receive, in addition to the Class B liquidation amount, the same liquidation amount that is paid to each Grifols ordinary share. 18

29 (b) Reserves The availability of the reserves for distribution is subject to legislation applicable to each of the Group companies. At 30 September 2011, an amount of Euros 29,308 which is equivalent to the carrying amount of development costs pending amortisation of certain Spanish companies (Euros 28,876 thousand at 31 December 2010) are, in accordance with applicable legislation, restricted reserves which cannot be distributed until these development costs have been amortised. Companies in Spain are obliged to transfer 10% of each year s profits to a legal reserve until this reserve reaches an amount equal to 20% of share capital. This reserve is not distributable to shareholders and may only be used to offset losses if no other reserves are available. Under certain conditions it may be used to increase share capital provided that the balance left on the reserve is at least equal to 10% of the nominal value of the total share capital after the increase. At 30 September 2011 and 31 December 2010 the legal reserve of the Parent Company amounts to Euros 21,306 thousand. Distribution of the legal reserves of other Spanish companies is subject to the same restrictions as those of the Parent Company and at 30 September 2011 and 31 December 2010 the balance of the legal reserves of the other Spanish companies amounts to Euros 2,106 thousand. Other foreign Group companies have a legal reserve amounting to Euros 692 thousand at 30 September 2011 and 31 December (c) Own Shares The Parent Company has executed the following transactions with its own shares during the nine month period ended 30 September There were no movements in own shares from 30 September 2010 through 30 September Num. of shares Thousand Euros Balance at 1 January , Acquisitions 105,000 1,250 Balance at 30 September 2010 and 30 September ,326 1,927 The Parent holds own shares equivalent to 0.05% of its capital at 30 September 2011 (0.07% at 31 December 2010). 19

30 (d) Dividends The profits of Grifols, S.A. and subsidiaries will be distributed as agreed by respective shareholders of each company at their general meetings. The distribution of the profit for the year ended 31 December 2009 is presented in the consolidated statement of changes in equity. The dividend per share distributed in July 2010 was as follows: 30/09/2010 Thousands of Euros % of par value Euro per share Amount Ordinary Share ,229 Total Dividend paid in July ,229 There were no dividend payments during the nine month period ended 30 September